Japan’s household spending rose from the prior year for the first time in six months. That was the limit of any good economic news for the monetary-stricken economy — and it doesn’t really survive closer inspection.
The rise in spending was due largely to “other” activities you don’t associate with strong economic rebounds. The overall figure was up a mere 1.6 percent in nominal terms and 1.2 percent in inflation-adjusted terms — but that was due largely to a 6 percent jump in spending on food, 14 percent on medical care, and 20 percent on education.
Those gains were balanced by the usual digression in household circumstances, including a 10 percent drop in spending on fuel, light and water, 4.3 percent decline in furniture and utensils, and 4 percent slide on clothing and footwear.
Household income declined yet again in February, down 2 percent in nominal terms and 2.4 percent adjusted for the CPI. Disposable household income, factoring taxes, was even worse at minus 3 percent nominal and negative 3.4 percent real.
Unfortunately, Japanese industry has now taken to the plunge as well. Japanese industrial production declined an enormous 6.1 percent in February from January. That was the largest monthly contraction since the 2011 earthquake/tsunami, except that the only disruption this time is decidedly unnatural.
Monetary Con Job
What are missing are benefits to all this — any benefit at all. It was all an illusion, a con.
Japanese businesses gained more profit in nominal yen terms but they aren’t actually doing anything more to receive it. They are doing less, actually, as the total number of hours worked slowly shrinks, and incomes with it.
In terms of industrial production, the index value for February 2016 was a little more than 2 percent below what was figured for April 2013 when the Bank of Japan’s latest stimulus program started.
For all the admitted negatives aimed at the household sector, redistribution hasn’t found anything to offset it. The opposite has actually occurred as now Japanese industry is also doing less for the three years of “extraordinary” monetary “stimulus.”
Just as in the U.S. and elsewhere, economists and policymakers in Japan were easily convinced in the second half of 2014 by a temporary increase in industrial production and other accounts as if that proved the tax hike was to blame for the 2014 troubles and that the struggles therein would be limited to that circumstance.
That bled into suggestions of 2015 where Japan, as elsewhere, was supposed to find only a “transitory” deviation from what would surely be quantitative and qualitative easing’s fruitful completion. That was a fundamental misreading of the situation in not just Japan but everywhere else – positive numbers do not make a real recovery.
Japan was never going to take off with that huge and continuous drag on household fortunes. It’s the same everywhere else monetarism is applied.
In fact, no matter how many QE’s and other activities the Bank of Japan has undertaken since the Great Recession, industrial production remains 20 percent less than it was eight years ago.
Only the financial and corporate sectors very narrowly count any of the QE’s as being “stimulus” — the rest of the country has been only impoverished.
Jeff Snider is head of global investment research for Alhambra Investment Partners, a registered investment advisory based in Palmetto Bay, Florida.
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